K-12 Tax & Spending climate: Wisconsin’s Tax Burden increases to 7% of income

Wisconsin Policy Forum:

Driven by rising income tax collections, Wisconsin’s state tax burden climbed in 2021 for the first time in a decade. Yet local and federal taxes as a share of income hit all-time lows during the pandemic and the total tax burden for state families and businesses is at its lowest level in at least a half century. Some taxes paid by middle-class families here remain relatively high, however, particularly the property taxes on a typical home.

For the first time in a decade, the state taxes paid by Wisconsin residents and businesses in 2021 grew as a share of income in the state. Yet the historically low levels of federal and local taxes in recent years have meant that the overall tax burden – and related spending on public services – have kept dropping for Wisconsinites.

The increased state tax burden did not result from higher tax rates, but instead reflected factors such as a surge in economic activity as the state emerged from the worst of the pandemic. In fiscal year 2021 (the 12 months ended on June 30), state sales tax revenues rose by more than 9% – the most in 37 years. Corporate income and franchise tax collections rose by 59.2% – the most in our records going back to 1960. Individual income tax revenues for the state rose by 6.2% – the most since 2013. In fact, total state tax collections from all sources grew 9.2% in 2021, the largest annual increase since 1984.

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